Guidance

DfE subcontracting standard

Updated 12 March 2026

Applies to England

This guidance is for:

Post-16 providers, including local authorities, who subcontract £100,000 or more of their DfE funded provision in a funding year.

DfE funded provision includes the following funding streams:

• Adult Skills Fund (ASF)
• 16 to 19 funding
• apprenticeships

This guidance does not apply to schools and academies.

1. Introduction

The standard is separate from, and different in purpose, to Ofsted’s Education Inspection Framework. It does not replace or overlap with Ofsted’s remit. The subcontracting standard is about oversight and management of public funds and ensuring that these are used to best effect, to maximise the value of those funds to benefit the learner.

This framework ensures that there is a clear and consistent approach for the (contract) management of subcontractors by lead providers and that there are robust assurance review arrangements.

It will assist in reducing the risk of:

• inadequate (contract) management of subcontractors

• non-compliance with DfE funding rules by subcontractors

• fraudulent and incorrect funding claims

This document sets out the requirements for all providers who subcontract £100,000 or more of their delivery, across all DfE funding streams.

The auditors report along with the signed statement (Annex C) must be returned to DfE via Document Exchange by the 31 July  2026.

2. Definitions

Lead provider

A lead provider is a college, training organisation or employer that has a direct contractual relationship with ESFA.

Subcontractor

A subcontractor is a separate legal entity or an individual that has an agreement (called a subcontract) with you to deliver any element of the education and training we fund.

A separate legal entity includes companies in your group, other associated companies, and sole traders. An individual could include a person who is a sole trader, self-employed, or employed by an agency unless those individuals are working under your direct management and control in the same way as your own employees.

Each lead provider and subcontractor must have a valid UK Provider Registration Number (UKPRN).

External auditor

An external auditor is a professionally qualified person from an organisation external to the provider that is able to provide an independent report on their subcontracting systems and controls. The person should be registered with an appropriate professional body.

For the sake of clarity, the external auditor cannot be an employee, director, trustee, shareholder or any other similar party with a vested interest in the provider, irrespective of whether their normal role is to carry out their audit work. The external auditor does not necessarily have to be a provider’s existing external auditor. 

3. Pre-award activities

Before you enter a subcontract arrangement you must be able to demonstrate the following:

1: There is a clear educational rationale or business case for subcontracting which aligns to the provider’s corporate and operational strategies. The business case should:

• set out the policy, business and operational objectives including consultation with stakeholders and undertaking research to determine the education rationale – this rationale must consider the expectation DfE has for providers to reduce their subcontracted provision
• be presented and approved at executive or board level for sign off

2: The education rationale meets one or more of the following aims:

• enhances the opportunities available for learners

• fills gaps in niche or expert provision or provides better access to training facilities

• supports better geographical access for learners

• offers an entry point for disadvantaged groups, or considers the impact on individuals with shared protected characteristics, where there might otherwise be gaps

3: The drafting process for the specification and requirements ensures the overall scope documented as part of the educational rationale or business strategy is broken down into more detail. This ensures that the:

• objectives for subcontracting will be met
• subcontractor will meet the requirements of this standard along with the requirements laid out in the funding rules

4: There is a procurement strategy that covers the invitation to tender (ITT) process. As part of the strategy, whether this is new or an existing process, the procurement process would include the drafting of the ITT documents. The provider should ensure that the contract document clearly and comprehensively sets out the parties obligations to the agreement.

5: That the ITT is sufficient to collect, but not limited to, the following information:

• organisation, including ultimate parent details including identity, ownership and background
• principal activities (past and present)
• organisational chart, contractor/sub-contracting approach
• professional/commercial affiliations
• legal, financial, capability and quality management systems
• Ofsted reports and experience and track record

6: The procurement strategy or process ensures that a robust assessment process for selecting subcontractors has been established. This should review the subcontractor’s completed ITT, as well as their capability to control quality, delivery, quantity, price and all the other factors contained in the subcontract. Following a successful appraisal, the subcontractor is placed on an approved list of contractors.

7: The evaluation process includes:

• the analysis of the potential subcontractor’s response to the main subject matter of the requirements set out in the ITT – for example the price, delivery, quality and methodology
• the quality of the bidder’s offer

There should be a clear rationale for how the tenders are evaluated and scored.

8: Following tender evaluation and, where appropriate, negotiation, the provider will satisfy themselves that an offer has been made which meets its requirements in all respects, including budgetary and capability. It will consider that it is able to accept an offer and award the contract to the tenderer who meets the contract specification.  It may then move directly to the award stage or make a recommendation to higher authority levels within the organisation for acceptance. This should be aligned to the provider’s strategic and operational objectives

9: Where appropriate, you have approval from DfE for any agreed subcontracting terms in relation to distance learning and whole programme subcontracting for 16 to 19. There is evidence to support this.

10: Management fees have been determined for the full range of funding retained and charges that they wish to apply, and these have been agreed at executive level and published on the website. These should only exceed 20% in exceptional circumstances. In all cases of fees exceeding 20%, DfE will ask for more information.

4. Contract award and management

In preparing for contract management and providing oversight the provider must be able to demonstrate:

1: That the subcontract meets the agreed educational objectives, is achievable and financially viable, and supports the intended outcomes. It should clearly define the critical success factors and consider alternative options, including existing contracts. A thorough risk assessment should be conducted, identifying where risks may arise and who they may affect.

2: The minimum provisions within DfE’s subcontracting rules form part of their subcontract agreement and learning and/or delivery must not commence prior to a signed contract being in place between the two parties.

3: All awarded contracts are managed by staff within the organisation who have clearly defined roles that have been agreed as part of the overall considerations in producing the business case. The defined roles ensure that contract ownership is clear, with the budget holder, senior responsible owner (SRO), and contract manager clearly defined (where appropriate).

4: There are well defined policies and processes and a clear contract management plan, with a focus on outputs and a ‘whole life’ approach to performance. For example. this must include, where appropriate, evidence of how the provider will:

• manage and oversee 16 to 19 distance and whole programme provision through the life of each learner’s programme of study
• define how whole programme subcontracting for ASF will be agreed and managed
• ensure apprenticeship provision is not delivered solely by a subcontractor, as per the apprenticeship funding rules with specific regard to substance, leading the relationship and the subcontracted delivery complimenting the main provider’s programme

5: These policies, including the rationale, are reviewed by the provider ahead of each Funding Year. The provider should also demonstrate that the policies and rationale have been appropriately authorised through the organisation’s governance structure. Once reviewed, updated policies must be published by 31 October in the relevant funding year.

6: Contract management processes are aligned with, among others, wider organisational governance processes, operational boards, and risk structures.

7: Contract management issues and performance are reported through the governance structure with senior level engagement.

8: Regular assessment and evaluation must take place to ensure that the cost of contract management activities is justified and proportionate to the benefits obtained.

9: Knowledge management is embedded, capturing key data and lessons from contract management process and experience, both within the organisation and more widely.

10: Professional contract management guidance is developed, or identified from external sources, and made available to contract managers.

11: There are robust procedures in place to ensure extremist organisations are not funded through subcontracting of any DfE funding.

 

5. People

In ensuring the right people are in place to carry out the contract management activities, the provider must demonstrate that:

1: Either the business continuity or contingency plan incorporates the role of the contract manager or those with contract management responsibility (ideally through involvement during the tendering or contract award processes) or continuity is ensured through appropriate handover and information sharing procedures being in place.

2: Contract managers have detailed knowledge of the contract and other relevant issues, such as:

• service level agreements
• requirements in line with DFE contracts
• funding rules
• current subcontractor performance

3: Contract managers have the appropriate skills (including general commercial awareness and expertise), with access to relevant training and development. Experienced contract managers are utilised on key contracts.

4: Contract managers have accurate job descriptions, roles are positioned at an appropriate level and salary, and there is a career path for contract management staff.

5: Contract managers have clear objectives and reporting lines, and their performance is managed through reviews and appraisals.

6: Contract managers have appropriate delegated authority to manage the contract effectively.  

6. Administration

In managing the contracts and the timetable for making key decisions, the provider must demonstrate that:

1: Signed contracts are stored and logged and are easily accessible when required; for complex contracts, a summary and/or contract operations guide should be produced.

2: Key contractual information is recorded appropriately to allow, for example; search capability; documentation of up-to-date contract information; and key dates.

3: There are mechanisms in place for identifying key contract ‘trigger points’, such as notice periods.

4: There is schedule of regular as well as ad hoc reporting of contract management information and retention of appropriate documentation - such as, minutes of contract meetings and reviews of teaching and learning.

5: There are appropriate processes and procedures in place to ensure that contracts are closed or terminated efficiently.

6: There is an appropriate process in place to quantify the information presented in the subcontracting declarations made to DfE. Where the information made in the declaration significantly changes an updated declaration should be made to DfE as soon as possible.  

7. Managing relationships

The provider must have appropriate procedures in place to manage their relationships with subcontractors and be able to demonstrate that:

1: Proactive conversations and/or independent checks are undertaken in relation the subcontractor at least on an annual basis. These should cover and document, as a minimum, the subcontractor’s:

• current ownership and person of significant control - DfE must be notified where this has changed from a previous year
• current or latest financial health position
• review of learning activity delivered, including compliance with the relevant funding rules for each programme^{[footnote 1]}
• business continuity or contingency plan remain relevant, or has been updated appropriately

2: The contract manager has clear visibility of the roles and responsibilities of staff on the subcontractor side.

3: The respective responsibilities of the contract manager and the subcontractor are clear and potentially defined in a ‘joint statement of intent’, or similar document.

4: Continuity of key subcontractor staff is desirable (ideally through involvement during the sales process). Where this cannot be achieved, there must be a handover from the staff responsible for the tendering process.

5: Both regular structured and informal communication routes between the contract manager and subcontractor are open and used; customer and subcontractor staff are co-located, where appropriate.

6: Communications between the contract manager, subcontractor, and other stakeholders are effective and stakeholders are involved in contract management processes where appropriate.

7: Problem resolution processes are well defined and used - and are designed to ensure minor problems do not escalate and cause relationship issues, so a ‘blame culture’ is avoided.

8. Managing performance

DfE’s expectation is that a prime will have processes and procedures in place to effectively manage subcontracted provision, you will be required to demonstrate that as a minimum:

1: Service management is well structured, baselines are understood by both parties, and subcontractors understand the service they are required to deliver. The contract manager ensures that the lead provider furnishes the subcontractor with the information and contacts needed to deliver the service.

2: Subcontractor performance is assessed using clear, objective, and meaningful metrics, linked where appropriate to DfE’s funding rules and/or guidance and to business needs.

3: There are regular formal performance reviews with subcontractors, with documented improvement plans agreed where necessary. These cover both operational issues and adherence to key contractual requirements, for example, on data security. Feedback is collated from learners.

4: There are clear contact points both within the subcontractor organisation and with the contract manager. All stakeholders understand escalation routes where issues arise.

5: Changes in requirements are captured and considered as part of formal change and contract management processes.

9. Payments and incentives

DfE’s expectation is that a lead provider will have sufficient processes and procedures in place to effectively monitor the financial payments in relation to their subcontracted provision. You will be required to demonstrate that as a minimum:

1: Payment mechanisms are documented and are clear and well understood by all parties, including incentives, penalties, and non-standard charges.

2: Payment processes are well defined and efficient – appropriate checks and authorisation processes are in place for paying invoices.

3: The costs of the services delivered, and contract management costs are mapped against budgets and allocated appropriately.

4: Payment changes after the contract is let, for example from contract variations or benchmarking and market testing, are made using contractual provisions and demonstrated to provide value for money.

5: Payments are not made in advance of evidence to demonstrate learning activity has been undertaken.  

10. Risk management

In order to provide assurance to DfE that you have effective risk management procedures in place to effectively manage the public money which is paid to subcontractors. As a minimum you will be expected to demonstrate that:

1: Contractual/subcontractor risk management is in place with:

• clear responsibilities and processes
• identification of who is best placed to manage risk
• subcontractor involvement, where appropriate

2: Risks are formally identified and monitored regularly, with mitigating actions developed and implemented, where possible, and ‘obsolete’ risks removed from consideration where appropriate.

3: Escalation and reporting routes are in place for risk governance.

4: Contingency plans are developed to handle subcontractor failure (temporary or long-term failure or default) and exit strategies are developed and updated through the life of the contract.

5: Contractual terms are understood and monitored by the contract manager in relation to:

• termination
• warranties, indemnities and insurance
• security and confidentiality

6: The contract manager monitors the subcontractor’s financial health and business performance, including using credit rating agencies.

11. Contract development and/or termination

In order to ensure that changes to the contract or termination are handled appropriately and efficiently the lead provider must ensure that:

1: Analysis of the subcontracted activity is done each year to inform the progress made in their plans for a reduction across the 3-year period.

2: They review the subcontract regularly (with a view to updating where necessary) to ensure it meets evolving business and educational needs.

3: Processes are in place that clearly lay out the governance of contractual change for both minor and major changes – who needs to approve what and how it will happen – with a focus on effective and prompt change implementation.

4: Value for money testing of existing services is done through benchmarking or other processes, where appropriate)=.

5: There are processes to cover the introduction of new services under the contract, including market testing where necessary.

6: Processes are in place to handle commercial (financial) changes to the contract in a fair and structured manner.

12. Provider development

Improving provider performance and capability is important in developing the relationship with subcontractors. Lead providers must demonstrate that they have:

1: Processes in place that clearly set out how provider development activities will be planned, managed, and governed.

2: Clear processes for benefits measurement and capture are in place to ensure that provider development is focused on continuous improvement and achieving value for the lead provider.

3: An understanding of what motivates and drives the subcontractor and how provider development fits with the provider’s goals.

4: Put provider operational performance improvement activities (for example, ‘Lean’ and ‘6-sigma’) in place, with potential input or assistance given by the lead provider.

5: Joint working or shared activities between the 2 parties for the benefit of both the provider and subcontractor, for example, process improvement, shared training, task forces or joint project team.

6: Implemented provider improvement activities relating to wider government initiatives, with input or assistance given by the lead provider, for example on:

• sustainability
• disability employment issues
• use of small and medium sized enterprises and suppliers from ethnic minority backgrounds

7: Developed shared risk reduction programmes or activities.

8: Completed shared management activities, for example, provider boards, to help performance improvement. 

13. Annex A – reporting requirements

Separate guidance for auditors is available in the ‘Subcontracting standard framework and guide for reporting accountants’.

Each reporting auditor can use their own stylised report, however, the report must include the following as a minimum:

• name and contact details of the organisation and reporting accountant conducting the assurance review
• name of the provider being reviewed and the provider contact
• funding year applicable to the review
• the period over which the review was performed and/or the date it concluded
• report status [Draft] [Final]
• table of contents
• executive summary / summary of findings with accompanying RAG ratings (Annex B has an example of how this should be presented)
• agreed objectives and scope of work
• approach
• detailed findings and recommendations linked to each point of the standard where the RAG rating is amber or red, in a tabular format with the headings such as:
  • area of standard
  • findings / observations / issues
  • risk / implications
  • recommendations
  • RAG rating
  • response from the provider
  • responsible officer and target date for completing each action

14. Annex B – Example report

[Name of audit organisation]

[Name and contact details of auditor]

[Draft] or [Final] Report of the assessment of DfE Subcontracting standard for [Provider ABC] for funding year [2025 to 2026]

[Insert Date]

[Contents]

Example: Executive summary

During the course of our review, we have identified the following observations which are recorded in detail at [cross reference to detailed findings] and summarised in the table below:

Subcontracting Standard Requirements	Number of records or exceptions raised	RAG rating	Summary of findings or exceptions noted
Pre-Award Activities	0	Green	No issues were noted during our review
Contract Award and Management	2	Amber	We identified 2 areas for improvement. Recommendations have been made in respect of [relevant detail]
People	6	Red	The provider was unable to supply evidence to demonstrate compliance with the standard
Administration	0	Green	No issues were noted during our review
Managing relationships	0	Green	No issues were noted during our review
Managing performance	0	Green	No issues were noted during our review
Payments and incentives	0	Green	No issues were noted during our review
Risk management	0	Green	No issues were noted during our review
Contract development and/or termination	0	Green	No issues were noted during our review
Provider development	0	Green	No issues were noted during our review

Example: Introduction

The subcontracting standard was introduced to the sector to drive improvement in the quality of contract management and oversight by lead providers. This standard will ensure that there is a clear and consistent approach for the (contract) management of subcontractors by lead providers and that there are robust assurance review arrangements. It will help to reduce the risk of:

• inadequate (contract) management of subcontractors
• non-compliance with DfE funding rules by subcontractors
• fraudulent and incorrect funding claims

This report is a review of [Provider ABC’s] compliance against the subcontracting standard. It will assist in DfE’s in its decision making as to whether the provider has the systems and controls in place to manage their subcontractors in line with the standard and provide assurance that subcontracted provision is appropriately managed.

Example: Objectives and scope

DfE has designed the approach and methodology for this review. This is to ensure that the review sufficiently covers all requirements and that there is consistency in approach and quality.

It has been designed to gain assurance that providers are managing their subcontracted provision to a high standard that ensures that public funds are used appropriately and for the purpose for which they were intended.

Our review covered all requirements of the standard as detailed in the executive summary and the compliance with the subcontracting funding rules which cover the following funding streams:

• carry-in apprenticeships
• adult education budget
• apprenticeships (for starts from 1 May 2017) *16 to 19 study programmes

Example: Approach

Outline of the approach undertaken, and procedures performed to identify the detailed findings and subsequent recommendations. Detail the type and levels of assurance and audit activity and align to international auditing standards where appropriate.

Example: Detailed finding and recommendations

Our detailed observations and recommendations are recorded in the table below:

Area of standard	Finding or issue	Risk or implication	Recommendation	Compliance Rating	Response from the provider	Responsible Officer and target date
2.1 CM	[Nature of finding]	Partially compliant with the standard	The provider should keep supporting evidence	Amber	Disagreed, supplementary evidence submitted to DfE with report.	Jane Smith 01 April 2023
2.1 CM	[Nature of finding]	Partially compliant with the standard	The provider should keep supporting evidence	Amber		Agreed	Jules Smith 01 April 2023
3.1 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Jaden Smith 01 April 2023
3.2 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Jack Smith 01 April 2023
3.3 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Jorgy Smith 01 April 2023
3.4 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Joey Smith 01 April 2023
3.5 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Jake Smith 01 April 2023
3.6 People	[Nature of finding]	Not compliant with standard		Red	Agreed	Jill Smith 01 April 2023

The Provider must complete this statement, electronically, confirming the validity of the reporting accountant’s assurance report, and submit it with the report to DfE.

15. Subcontracting standard: assurance declaration

By noting the check boxes below, I confirm the following:

☐ I have submitted the final assurance report, issued by the reporting accountant, on my organisation’s subcontracting arrangements to DfE for 2025 to 2026 funding year. 

☐ I have submitted the excel template with the RAG ratings for each question and this agrees to the reporting accountant’s report. 

☐ The information provided on my organisation is accurate. 

☐ The final assurance report and the template is in its original format, as supplied by the reporting accountant and has not been amended.

☐ I understand that if DfE discovers the accompanying information provided with this statement contains material inaccuracies, then my organisation could risk being in breach of contract and subsequent action could be taken by DfE.

First name and last name:
Signature:
Provider name:
UK Provider Reference Number:
Date (DD/MM/YYYY):

1. For apprenticeship provision the lead provider must ensure that the subcontractor does not deliver the entirety of the programme. In addition, the lead provider must take regard to substance, leading the relationship, and the subcontracted delivery complimenting their main programme. Furthermore, the lead provider should utilise the funding rules monitoring reports to ensure that their subcontractors are not claiming funding for the same learners through a direct contract with DfE or another subcontracting relationship with another lead provider. ↩